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By Jason Stipp | 05-04-2012 10:00 AM

Can Anything Up the Tempo on Employment Growth?

Despite month to month volatility, the employment growth trend has been very steady (if uninspiring).

Jason Stipp: I'm Jason Stipp for Morningstar. We got the government employment report for April on Friday. 115,000 jobs were added to the economy last month. This was less than the consensus estimate, but right in line what Morningstar's Bob Johnson and Vishnu Lekraj had expected for the report. They are with me to offer their take on the numbers. Thanks for joining me guys.

Vishnu Lekraj: Thanks.

Bob Johnson: Great to be here.

Stipp: So, Bob, 115,000 jobs, there was 130,000 private sector. Both you and Vishnu had expected between 115,000 and 130,000; you were right on the mark there. Where there any surprises in this report then?

Johnson: You know what, it was pretty much right down the line. I think retail may have been just a little stronger than I hoped, and government was a little worse than I hoped. And obviously, construction had slowed down as we expected because January and December were such a warm months, and now we kind of had a payback this month and down employment in construction. And manufacturing which had a real boom at the beginning of the year, when we ramped up all the auto plants to produce, slowed a little bit. So those were the two big things that I'd count on that side of the house.

Stipp: Vishnu, when you looked at the numbers and they were right in line with what you'd expected, was there anything in the composition that surprised you?

Lekraj: Not necessarily, I mean the retail sector was again like Bob said it was little bit of a upside surprise in terms of general merchandising. All goods manufacturing sectors were pretty flat. One thing that did concern me a little bit was leisure and hospitality, which didn’t produce a whole lot. And you expect about this time in the year they would start to hire a little bit in a more robust way, but that wasn't the case this time around.

But temporary labor picked up its pace again as it has in the past, which is a good sign meaning that businesses are starting to put their toe back into the water. No champagne, no parades this time, but hopefully next time around.

Stipp: Bob, there were some revisions to the February-March data. Those were actually kind of a bright spot in the report. What do you make of that?

Johnson: I mean, again I got to be careful. I don't want to be too Pollyannaish about it, but when you look at the numbers, the revisions were so large in the previous two months that the number that everybody expected to have for total employment at the end of April was just exactly where the consensus thought it was going to be. But the way they got there was better growth in February and March and less growth in April. So, we still got to the same place, but we got there in a way that didn’t really please people very much.

Stipp: So you revised that March number from 120,000 jobs to 154,000. I think that would have probably made us feel a bit better about results last month if we'd seen that 154,000 number right?

Lekraj: Yeah for sure. I mean psychologically it was a good number if we were to see that last month without it being revised, but that wasn't the case. And you probably will see that happen here over the next several months. The government probably will revise their numbers up a little bit as they usually do, but in the economy we have, sometimes psychology plays a bigger role than actual facts.

Stipp: Bob you mentioned--and again I think this underscores the fact that we need to look more broadly and see what the trends have been--you mentioned to me that the trend that we've seen in employment growth when you look at it in a broader perspective, it's actually been pretty consistent if not too exciting. What do you see when you look at the numbers now?

Johnson: It's been remarkably consistent, and you know I like to look at the employment numbers on a year-over-year basis. What I usually say is let's take a three-month moving average. I'm going to even toss that caveat out today and just say let's look year over year, April-to-April, March-to-March, February-to-February. The number has been rock solid at about 1.5% each and every month. I mean it's almost boring to look at the numbers.

We get all excited about looking at one month, jump to jump, and the numbers aren't comparable. Tt's very much like comparing Christmas sales to sales in July, which are a way different. We try to adjust for it. We tweak it, and we look month-to-month and then annualize it and try to get a figure for it. You know what, it's just not working because it shows a pretty volatile pattern. You look at the year-over-year pattern and it's like, I can see exactly what's happening, we're growing about 1.5%. GDP is growing a little bit closer to 2%, it just kind of as it should be.

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